‘Credit crunch’ or capitalist crisis?

Unemployment, the profit system and the power of euphemism.

Proletarian writers

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Proletarian writers

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“The mass of the divided capital is thus pushed into adventurous channels, speculation, fraudulent credit, fraudulent shares, crises.” (Karl Marx, Capital )

As is frequently true of Karl Marx, co-founder with Friedrich Engels of the scientific socialism on which both the ideology and the practical work of the Communist Party of Great Britain (Marxist-Leninist) are based, the relevance of his words is such that he could have penned them at eight o’clock this morning rather than in the late 1860s.

When we read about speculation and fraudulent credit, our minds inevitably focus on what the capitalist media systematically assure us is the root cause of the current ‘economic downturn’.

We are told with unfaltering regularity by the BBC, and by newspapers as diverse as The Guardian and The Sun (when the latter doesn’t prefer to focus on the latest evictee from the Big Brother house), that our present economic woes are due to a few irresponsible US bankers deciding out of personal greed to lend money to poor people who didn’t have a snowball’s chance in hell of paying it back.

When the chickens came home to roost, we therefore found ourselves in the grip of a ‘credit crunch’, an expression that is now doing the rounds throughout the entire English-speaking world.

The newly installed US president clearly – and unsurprisingly – agrees with this analysis, choosing in his inauguration speech to blame the situation on ‘the greed and avarice of a very few’.

In the wake of the 1929 stock market crash, a prolonged and devastating slump – subsequently to be described in history books as the Great Depression – took hold in all the capitalist countries (though notably not in the USSR with its planned economy), but it was variously described at the time as ‘this slide’, ‘our current economic difficulties’ and ‘straitened economic times’.

Full marks to the pundits and civil servants who coined these marvellous euphemisms, both in the 1930s and today. Things might be bad, but ‘credit crunch’ – like ‘blue on blue’ (soldiers on the same side accidentally bumping each other off) and ‘collateral damage’ (civilian casualties) – sounds reassuringly innocuous. With the word ‘crunch’, we could even be talking about a new breakfast cereal.

The reality, however, is somewhat different. This is not a ‘credit crunch’; it is capitalism in crisis. And why is it in crisis?

Karl Marx was, of course, absolutely correct in observing that there was little difference between large-scale finance capital – a relatively new phenomenon in his time – and legalised gambling.

And, yes, the current global crisis was initially sparked by the ‘sub-prime’ mortgage debacle on the other side of the Atlantic.

But that it spread so rapidly to other, productive, sectors of the economy tells us that more is going on here than a few moneylenders making bad – and personally motivated – decisions as they’re shunting seven-figure sums from one computer screen to another.

Underlying what looks set to be the worst economic catastrophe for capitalism since the aforementioned Great Depression is not the subjective greed of a small bunch of bankers. Rather, the system itself is intrinsically prone to crises of varying degrees.

This is not a collapse of the finance sector. It is evidence of the entire, obsolete capitalist mode of production beginning to implode under the weight of its own contradictions.

Far more significant than the need to bail out the banks at public expense is the fact that, in its drive for maximum profits (the main law of capitalism, and one which operates independently of any individual capitalist’s thoughts and feelings on the matter), the system we live under insists on producing more goods and services than the people who actually produce them can ultimately afford to buy in their other role as consumers.

Marx referred to this as a crisis of ‘relative’ overproduction, because it’s still true that not enough is being manufactured to meet people’s real needs; only that more commodities are being churned out than can be sold in order to realise the capitalists’ profits.

Of course, the current crisis – we can call it that because we’re not ITN or the Financial Times – brings with it increased levels of joblessness of the kind which a hand-wringing Gordon Brown recently described as “a matter of regret and sadness”.

Unemployment is a permanent feature of capitalism. Without what Marx termed the ‘reserve army of the unemployed’, the bosses couldn’t maintain the pressure to keep wages down in real terms. Nor could they have an unpaid ‘labour force in waiting’, ready to be called upon and offered a few quid in times of economic boom.

But in times of crisis, unemployment inevitably goes up. In the current situation, irrespective of whose figures you believe, it has rocketed.

At the recent ‘jobs summit’ convened by a nervous Downing Street and attended by bosses and trade union bureaucrats (but not by any actual workers, whether employed or otherwise), it was admitted that levels of employment since the onset of the ‘credit crunch’ have declined by 1.2 percent in the finance sector and a full 3.7 in what remains of Britain’s manufacturing industry.

The answer? Apparently Brown and his minions are preparing to hand out financial incentives to employers who agree to hire the great unwashed – workers who have been unemployed for six months or longer.

A noble gesture designed to counteract the effects of an economic climate which employment minister Tony McNulty has described, using passionate and deeply moving prose, as “disappointing”.

Meanwhile, the official unemployment figures show that there were 1.92 million people out of work between September and November – up by 131,000 from the previous three months and the highest number since 1997.

And let us bear in mind that these statistics, as with those that follow, don’t take account of those who, for whatever reason, have either been refused the dole or not claimed it in the first place.

Nor do the preceding figures take account of the tens of thousands of jobs axed in December and January. One has only to think of Jaguar, Barclay’s Bank, HSBC, TT engineering, Woolworths, Marks and Spencer and an estimated hundred other well-known firms.

According to Britain’s largest bosses’ organisation, the Confederation of British Industry, the total jobless figure just a year from now will be “three million or more” and “we are in for a protracted downturn [that superb euphemism again!] of indeterminate length”.

We apparently have to wait until late February for the up-to-date figures reflecting the period since last November, but even the statistics we’ve already got put the overall number of redundancies so far at 225,000.

Alleged expert Alan Clarke of the Banque Nationale de Paris has mastered the art of stating the bleeding obvious. “This is a very rapid pace of job shedding,” he cautiously ventured.

And he continued by sharing the following upbeat thought: “There is still plenty of bad news in the pipeline.” Thanks, Alan.

One aspect of the current spate of layoffs that hasn’t got a lot of media attention is the fact that they are disproportionately targeted at young people.

Could this spark in a new generation of workers the desire to look for an alternative to capitalism itself? The journey from starting to realise that capitalism doesn’t work to actively embracing the struggle to overthrow it, and build socialism, is long and arduous.

But the CPGB-ML extends an invitation to all working people, young and old, to join us in the struggle for a new world where those who produce society’s wealth will actually run that society; where production will be rationally planned on the basis of public need rather than private greed; and where unemployment will be just a dim and distant memory.

We call that new world socialism, and it represents the future of all humanity.


In our country, in the USSR, the workers have long forgotten unemployment. Some three years ago we had about 1.5 million unemployed. It is already two years now since unemployment was completely abolished. And in these two years the workers have already forgotten about unemployment, about its burden and its horrors. Look at the capitalist countries: what horrors result there from unemployment! There are now no less than 30-40 million unemployed in those countries. Who are these people? Usually it is said of them that they are ‘down and out’.

Every day they try to get work, seek work, are prepared to accept almost any conditions of work, but they are not given work, because they are ‘superfluous’. And this is taking place at a time when vast quantities of goods and produce are being wasted to satisfy the caprices of the favourites of fortune, the scions of the capitalists and landlords.

The unemployed are refused food because they have no money with which to pay for it; they are refused shelter because they have no money with which to pay rent. How and where do they live? They live on the miserable crumbs from the rich man’s table; by raking refuse bins, where they find decayed scraps of food; they live in the slums of big cities, and more often in hovels outside the towns, hastily put up by the unemployed out of packing cases and the bark of trees. But this is not all. It is not only the unemployed who suffer as a result of unemployment. The employed workers, too, suffer as a result of it. They suffer because the presence of a large number of unemployed makes their position in industry insecure, makes them uncertain about their future. Today they are employed, but they are not sure that when they wake up tomorrow they will not find themselves discharged.

(‘The Results of the First Five-Year Plan’ by JV Stalin, Problems of Leninism, 1933)


> The economic crisis deepens – Februrary 2009

> Economic crisis: no escape under capitalism – December 2008

> Financial hurricane leaves Ike in the shade – October 2008

> The economic crisis deepens – Lalkar November 2008